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Stefan E. Weishaar, Introducing Carbon Taxes at Member State Level. Issues and Barriers

This paper examines the implementation issues and barriers for introducing a carbon tax at EU member state level. Important
success determinants are related to the political economy of introducing taxes (negotiations with stakeholders, concessions,
changes in proposed legislation, compromises, etc.) which translate i.a. into competitiveness issues, and fairness/equity/distribution
issues. For these the design of the carbon tax exemptions, and safeguards to prevent progressivity and the use of the tax
proceeds are important. The analysis will focus on the "frontrunner" countries in the EU which have been very successful in
terms of the introduction of carbon taxes (Sweden, Denmark and Finland). The countries employed different implementation strategies
but underscore the importance of successful issue, timing, linking and to foster political support by safeguarding competitiveness
and by addressing income distributions.

The CATs project focused on carbon taxes as a policy instrument for achieving emission reductions particularly in sectors
not covered by the EU Emission Trading Scheme (EU ETS). Based on a systematic review of carbon taxes in EU member countries
and a qualitative assessment of the implementation barriers and success factors in frontrunner countries a model-based analysis
of the effects of various carbon tax scenarios for Austria was performed. Policy recommendations were developed for Austria
and the EU. The project results suggest that carefully designed CO2 tax schemes can play an important part in achieving greenhouse
gas emission targets for non-ETS sectors in Austria with potentially positive distributive and macroeconomic impacts.

Study by: Austrian Institute of Economic Research – University of Groningen

The aim of this paper is to map legal aspects that should be taken into account in designing a carbon tax. The survey of the
legal literature concludes that many different aspects have to be taken into account in designing a carbon tax, both with
respect to the kind of legal instruments to be used and the actual design of the tax. It is analysed how these legal concepts
relate to economic theory. This overview of legal considerations may help in creating a sustainable, effective and efficient
regulatory system for reducing emissions, as carbon taxes can play a crucial role for achieving long-term emission reductions.

The excitement about concluding the Paris Agreement is giving way to the sobering realisation that a lot more needs to be
done to attain its climate policy objective. More and more EU member countries embrace carbon taxes but the national measures
differ strongly. In an integrated European market this challenges the level playing field of competing industries and the
transboundary nature of regulating a global pollutant and calls for a solution on EU level (or higher). Past attempts to regulate
carbon emissions at EU level by fiscal measures have, however, been markedly unsuccessful. This paper therefore examines introduction
issues and barriers of a CO2 tax at EU level and offers policy suggestions to move forward.

This paper provides an overview of energy and (implicit) CO2 taxation in the EU member countries. Against the background of
the EU energy taxation directives, energy and implicit CO2 tax rates in the EU countries are discussed, focussing on taxation
in the transport sector as a major non-ETS emitter. Empirical evidence on the impact of energy and carbon taxes on energy
use and emissions is presented and the economic and distributional effects of energy and carbon taxes are then discussed.
Research on energy price elasticities suggests that energy and carbon taxation can make a significant contribution towards
achieving emission reductions, particularly in the transport sector where greenhouse gas emissions continue to be on the rise
in the EU. Evidence on the economic impacts of energy and carbon taxes furthermore shows that a double divided can be achieved.
With respect to the distributional impacts of carbon and energy taxes evidence is, however, mixed. While empirical studies
generally negate regressive effects for taxes on transport fuels, energy and carbon taxes on heating fuels tend to be found
regressive.

Economic literature generally favours market-based instruments for regulating environmental externalities since they ensure
compliance at the least cost to society. Emission taxes have been increasingly introduced internationally, with the focus
shifting to CO2 after the adoption of the Kyoto Protocol in 1997. In this paper, the theoretical economic literature on energy
and emission taxes is reviewed. The focus is on theoretical recommendations regarding the optimal design of environmental
and especially carbon taxes, their performance relative to other instruments, the concept of a double dividend as well as
potential competitiveness and distribution effects. Carbon taxation can play a key role in climate policy and for achieving
long-term emission reductions. This overview of economic considerations may help in creating a sustainable, effective and
efficient regulatory system for reducing emissions.

This project focuses on carbon taxes as a policy instrument for achieving emission reductions particularly in non-EU ETS sectors.
We perform a systematic review of carbon taxes in EU member countries in quantitative terms and a qualitative assessment of
the implementation processes, barriers, related legal and political science aspects. A model-based analysis of the effects
of introducing carbon taxes in Austria will be performed and policy recommendations are developed for Austria and the EU.